As Bitcoin Sets Record After Record, Warnings Grow Louder

In this 2014 file photo, Bitcoin logos are displayed at the Inside Bitcoins conference and trade show, in New York. (AP Photo/Mark Lennihan, File)

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What goes up must come down. CNBC reports that bitcoin passed the $11,000 mark for the first time Wednesday just hours after surpassing $10,000 for the first time. Wednesday was the sixth day in a row the cryptocurrency hit a record high, increasing its value 15%, according to Reuters. But later Wednesday, the value of a bitcoin plummeted to as low as $9,300, the AP reports. Regardless, that's still a massive increase over the $1,000 value of a bitcoin at the start of the year. And the CEO of CryptoCompare tells Business Insider the passing of $10,000 was a "seminal moment" for bitcoin. The cryptocurrency market as a whole is now worth more than $330 billion total.

The recent meteoric rise of bitcoin has brought increasing warnings of a bubble set to burst. "Even if you believe in bitcoin, the velocity of the move is a sign that it is parabolic," CNBC's Jim Cramer says. "And parabolic moves don't last." It appears few people are actually using bitcoin as currency, instead stockpiling it in hopes of increasing their capital. “What’s happening right now has nothing to do with bitcoin’s functionality as a currency—this is pure mania that’s taken hold,” research fellow Garrick Hileman tells Reuters. Hileman says "people need to be very careful" about the coming burst. But it appears few are heeding his message. One provider signed up more than 300,000 new bitcoin users over the Thanksgiving holiday. And one analyst predicts the bubble is going to get a lot bigger still—say $40,000 by the end of 2018. (Read more bitcoin stories.)

Five years from now, the build up and crash will be a Harvard case study.

julianpenrod

Nov 29, 2017 8:04 PM CST

In general, conventional secure systems of "currency" are based on an equivalent amount of desired items. Essentially, the system must have a kind of collateral to exist. It used to be gold. That6 is not the way with bitcoins and, indeed, there may be no basis for the currency at all. In terms of an ultimate tallying of valus, what can be expected if everyone cashed in simultaneously, there may7 be absolutely nothing. With respeect to the basis for bitcoins, most involved fall into one of two groups, the majority who use bitcoins but don't know the basis, and the minority, who control the system anc know what the "basis is, if it even exists, but aren’t talking. It’s not like an account based on conventional equivalent worth or similar systems, putting a balance into an account then drawing from it. The most that ever gets mentioned about the actual valuing of bitcoins is some nebulous verbiage about individuals cashing in some processing power of their computer for some kind of "psychological project". It appears "value" increeases based on their computer’s processing power being tapped into, evidently without their even knowing, for the "psychological project". Beyond that, it’s a matter of speculation. They pay inflated prices for bitcoins that were already created, they may have to let more of their computer power be taken to get new bitcoins. Like so many s[peculative systems, it all depends on enough people willing to accept it, to pretend there is value. In systems baxsed on something, when people engaging in the system don’t trust it, there can always be something that will be considered valuable so the system doesn’t collapse. If people stop telling themselves the system is reliable, if the system falls short of proving itself by paying those who want to convert their holdings to cash, that can lead to a collapse. It doesn’t really seem to be mentioned what is leveraged in bitcoins. If it’s a great deal, a collapse of the bitcoin market can lead to great damage to the economy, overall.